Engagement Marketing Agency & Consultancy

In the auto industry, imitation is a very high form of flattery, and many automakers copy each other's technologies, adding just enough of their own proprietary design and unique features to keep the patent attorneys from sending the...

Posts Tagged ‘Cash for Clunkers’

Funny. No one can deny that the cash for clunkers program has helped thin out bloated inventories at dealerships across the nation. And no one can deny that the production needs to crank up now among the big 3 to meet the increased demand. However, the overall impact financially on the industry remains in question. Consider the following sales forecast from IHS that was released recently:

IHS raised its full-year 2009 sales forecast to 10.3 million light vehicles from 9.8 million previously.
But IHS is shaving its 2010 sales forecast to 11.1 million from 11.3 million, reflecting the anticipated “payback” from the incentives-fueled boom.
“It’s not until 2012 where we start to approach the level where we fell from,” Magliano said.
Last year, sales declined to 13.2 million cars and light trucks, down from 16.1 million in 2007. A deep recession has pushed demand for autos this year to the lowest level since the 1980s.

Bottom line – consumers are stepping up vehicle purchases…potentially at the risk of foregone profitability.

Do U.S. Consumers get it? Get it that the quality of U.S. manufactured brands is nearly at or is at par with the Europeans, Japanese and Koreans. Get it that by trading in their U.S. manufactured “clunker” and replacing it with a new foreign manufactured vehicle, they are essentially asking us (the taxpayers) to subsidize our foreign competitors.

Consider this: of the top 10 vehicle that have been turned in since the clunker program began, all 10 are U.S. badged. Only 4 of the top 10 vehicles that were then purchased using clunker cash are U.S. badged. So you loved us then but you don’t anymore???

Yes there is this thing called brand perception where U.S. brands are stuck in neutral in the minds of the U.S. consumer. Another contributing factor undoubtedly was that the vehicles being turned in were originally purchased with very aggressive discounts, 0% financing and the like…and now consumers are purchasing more with their head rather than their wallet, when price is on fairly comparable terms.

Cash for Clunkers. I wouldn’t say the 04 Ford is a clunker by any stretch or definition…but the US Government does. I calculated how much the voucher would total and it came out to $3,500. Just in case you missed it, the US Government is enticing consumers to trade in their vehicles, in an effort to stimulate the laggard auto industry. Here are the details:

Trade-in Requirements: In order to determine whether you can receive a CARS purchase voucher, you must first determine if your trade-in vehicle meets the following basic requirements:

Your trade-in vehicle must have been manufactured less than 25 years before the date you trade it in. It must have a “new” combined city/highway fuel economy of 18 miles per gallon or less. It must be in drivable condition and have been continuously insured and registered to the same owner for the full year preceding the trade-in. Work trucks such as very large pickup trucks and cargo vans have different requirements that can be determined by contacting your participating dealer. Your trade-in vehicle must be scrapped and recycled in accordance with a process to be announced by the government shortly.

The result of this for the industry here in the U.S. has been fairly positive…although not without some controversy. The controversy is that the government mis-estimated the interest…and had to scramble to reinforce the funds allocated. The upside thus far can be found in Ford’s July sales: up 2.3%, due largely to this program. The industry as a whole is back over the 10 million annual unit rate domestically. Recovery is near.